AUD/USD Holds Above 0.7000 as Dovish RBA Offsets USD

Key Moments

Dollar Weakness Supports AUD, But Follow-Through Is Lacking

The AUD/USD pair is extending its constructive tone for a second consecutive session on Thursday, as selling pressure on the U.S. Dollar drives the exchange rate higher. A Democratic sweep in the U.S. midterm elections and a decline in U.S. government bond yields have pushed the greenback to its lowest level since late September, helping AUD/USD stay above the key 0.7000 psychological threshold during Asian trading.

Despite this improvement, the advance shows limited traction. The pair is struggling to build meaningfully on the prior day’s sharp rebound from the mid-0.6900s, which marked a two-and-a-half-week low, prompting traders to remain cautious about chasing further gains at this stage.

RBA’s Dovish Hike Seen as a Drag on the Aussie

The Reserve Bank of Australia delivered what has been interpreted as a dovish rate hike on Tuesday, signaling a preference for a more guarded, wait-and-see approach going forward. Policymakers emphasized mounting risks to the labor market and, notably, removed explicit language about future rate increases from the policy statement for the first time since June. This communication has reduced expectations for a policy move in December.

That softer tone from the RBA is exerting downward pressure on the Australian Dollar and is acting as a counterweight to the support coming from a weaker U.S. Dollar, effectively curbing the upside in AUD/USD.

OCBC Flags Peak RBA Rates Amid Slowing Economy

Analysts at OCBC argue that the domestic economic backdrop is becoming less conducive to additional tightening by the RBA. They point to signs of cooling activity, weaker housing markets, and a deteriorating labor picture, noting that “the economy is slowing, housing prices have fallen significantly and the unemployment rate has risen”.

In this environment, OCBC adds that “we expect no more hike in this cycle, and the next policy move is likely to be a cut,” reinforcing their assessment that the current cash rate represents the peak of the present tightening cycle.

Event Risk: U.S. Jobs Data, Fed Speakers, and Geopolitics

Market participants remain reluctant to establish strong directional positions in AUD/USD ahead of the upcoming U.S. monthly employment release, commonly referred to as the Nonfarm Payrolls report. The labor market data are expected to offer important guidance on the U.S. economic outlook and on the potential trajectory of Federal Reserve policy.

Traders will also scrutinize comments from key Federal Open Market Committee members for additional clarity on the Fed’s policy stance. At the same time, developments related to the Middle East crisis may influence risk sentiment and, in turn, drive flows into or out of the U.S. Dollar and the AUD/USD pair.

Technical Picture: Upside Capped Below 200-Day SMA

On the technical front, AUD/USD retains a mildly bearish short-term tone while it trades beneath the 200-day Simple Moving Average, currently located at 0.7058, and below a significant Fibonacci retracement cluster beginning at the 38.2% level near 0.7024.

Momentum indicators offer only tentative signs of stabilization. The Moving Average Convergence Divergence (MACD) is showing a modestly positive reading, while the Relative Strength Index (RSI) is hovering close to the neutral 50 mark. Taken together, these signals suggest consolidation rather than a decisive bullish shift.

Key Levels: Fibonacci Map and Moving Averages

Further strength above the 38.2% Fibonacci retracement at 0.7024 is expected to encounter firm resistance, with gains likely contained near the 200-day SMA at 0.7058. Above that, the 50.0% retracement at 0.7065 represents the next technical barrier. Additional resistance zones are seen at the 61.8% Fibonacci level at 0.7105, the 78.6% level at 0.7163, and the cycle high located near 0.7236.

On the downside, initial support is identified at the 23.6% Fibonacci retracement at 0.6974. Below this, a more important structural base lies around 0.6893, which marks the anchor point of the current Fibonacci swing.